Use the Information Below to Answer the Following Question(s)

question 45

Multiple Choice

Use the information below to answer the following question(s) . Below is a decision tree illustrating the R&D process for a new drug. Let us assume that if market is large, payoff is lognormally distributed with a mean of $4,900 million and a standard deviation of $1,000 million; if market is medium, payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if market is small, payoff is normally distributed with a mean of $1,800 million and standard deviation of
$200 million. Let us also assume that the cost of clinical trials is uncertain and estimates are modeled with a triangular distribution with a minimum of -$700 million, a most likely value of - $550 million, and a maximum of -$500 million. Use 10,000 trials and a random seed of 1.
-What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]

• A) $ 119.0
• B) $ 116.1
• C) $ 105.7
• D) $ 94.0

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Definitions:

Intrapersonal Communication

The process of internal dialogue or communication with oneself, which involves thinking, self-talk, and personal reflection.

Personal Thoughts

Individual reflections or considerations that are private or internal.

Thinking

The process of using one's mind to consider or reason about something, involving judgment, perception, and the creation of ideas.

Silent

The state or quality of being quiet and not making any sound, often implying the absence of communication or the refusal to speak in a particular situation.